Money Can Buy You Happiness. Here’s Why.

What's up you guys? It's Graham here. So let's attempt to answer the age-old question: Can money actually buy you happiness?

After all, it's often touted as the simplest solution to every problem life throws your way. From the dead-end job that you hate, to the neighborhood you can't wait to get out of, to the stress of living paycheck-to-paycheck, and wondering how great your life will be once you finally win the lottery or get that promotion or get that lucky break. Money is often viewed as the golden ticket out. Even if you're not entirely unhappy with how things are going, every single time you open Instagram or see that person driving next to you in a red Ferrari, it's a constant reminder that money could enhance everything around you, give you more exhilarating experiences, and perhaps lead to a more fulfilling life.

But how much of this is actually true? Or have we just created a falsified reality that money will never entirely solve? Well, when it comes to this, I'm no stranger to research. And when it comes to research, the findings are somewhat incongruent.

On the one hand, Princeton University conducted a survey throughout 450,000 people in 2010, analyzing various income brackets to track a person's overall happiness and well-being. The results actually concluded that having a low income worsens the emotional pain associated with divorce, ill-health, and also being alone. Low income also limited a person's ability to do what matters most to their emotional well-being, like being able to spend time with people they like, or avoid any disease, or just simply enjoying their leisure free time.

However, the positive effects of money begin diminishing once a person reaches about $75,000 a year. So beyond that amount, how much a person makes begins having much less of a measurable effect in terms of how happy they are. This shows that yes, money can buy an element of happiness to a certain degree, but the impact money has on you really begins to decline after about $75,000 a year.

But the studies don't quite stop there because in 2018, Purdue University analyzed more than 1.7 million people throughout 164 countries and found that $75,000 a year was the ideal amount for a person's emotional well-being, meaning how much they enjoyed their day-to-day. However, it was found that $95,000 a year was ideal for what's called life evaluation, which measures how a person thinks and acts about their long-term goals and aspirations.

But then, after about an hour of research going over all of the analytics and data, I started to think to myself, well, $85,000 was the average throughout 164 countries, but how much will it cost to be happy here in the United States? Then, within just a few minutes after that, I found my answer: One hundred and five thousand dollars is how much it takes here in North America, not only to reach a peak state of happiness, but also life satisfaction in general.

Then, if you're a family supporting more than just yourself, the amount of money you need to be happy is the square root of your family size times one hundred and five thousand dollars a year. So a family of four would need two hundred and ten thousand dollars, a family of eight would need two hundred and ninety-seven thousand dollars, and so on.

But here's where things take a slightly different turn because a study done by the Journal of Psychology found that money does indeed buy happiness if you know how to properly spend it. According to them, here's what you can buy that will make you happy:

First, spend money on experiences and not things. Studies have shown that the effects of buying a material item quickly begin to fade once we get used to it. But the experience of doing something is something that our mind can constantly look back on, bringing us more positive emotion. Not only that, but our minds are more likely to recall experiences than we are material possessions, which have a more long-standing impact on our emotional well-being.

The research when it comes to this actually begins to go much deeper because we're more likely to tie our own identities from our experiences than we are from our material purchases. And those experiences that we have are much more difficult to compare to someone else, leaving us with something that is really uniquely our own.

Second thing, it was found that people get the most happiness when they spend the money on smashing the like button for the YouTube algorithm. If you have not done that already, I had to throw that in there. I had to put that somewhere in the video, so this is where it is. Whew! And mine's, thank you! Let's get back into it!

Anyway, secondly, is spending more money with other people. Studies were conducted in which people were given money and tracked how they spent it—either on themselves or with other people. It was found that the group that spent the money with other people reported a much higher level of enjoyment and satisfaction with their purchase than the group that spent the money on themselves. So anything we do to improve our connection with other people tends to improve our happiness as well, and that includes spending money with other people.

Third, spend money frequently on small things and infrequently on large things. Our mind's ability to adapt to even the best purchases that money could buy is inevitable. So given that it was found that our minds are less likely to adapt to a variety of smaller purchases than we are to one large one, the reason being for this is that the smaller purchases are less likely to be the same each and every time. For instance, going out to dinner is going to be a slightly different experience every single time you go, versus the brand new pair of shoes you buy is just going to be the same pair of shoes.

Fourth, spend less money on insurance. Now, this one might sound a little bit counterintuitive because you would think insurance just brings you peace of mind. But purchasing extended warranties or other forms of purchase protection was often associated with future regret of the purchase, and people were more likely to regret their purchase before they even bought it. Although when this was studied, it was actually found that a person is more likely to imagine a regret that is much worse than what they actually feel after they bought something. This shows us that really, the worst is just in our own mind.

A fifth point is to pay for things upfront but then enjoy them later. Research has shown that people can derive an incredible amount of happiness and enjoyment from anticipating an event, even more so sometimes than the actual event itself. It's almost like just going on a vacation today and getting X amount of enjoyment from it versus going on a vacation next weekend and getting the same level of enjoyment from that, plus getting all the additional enjoyment from just being able to look forward to that.

I'd mentioned the study before, but research has shown that when people go shopping, their brain actually receives the most amount of enjoyment from the anticipation of buying something, not the act of actually going and buying something. And when we go and look forward to an event, it'll bring on a stronger sensation of enjoyment than when we look back on a past event.

All of this really comes down to one thing, and that would just be delayed gratification because not only do you still get to enjoy the event itself, but you also get to enjoy the anticipation leading up to that event. This allows you to more carefully think about your purchases and more carefully think about where your money is best spent.

Oh, sixth, think about what you're not thinking about. It was found that the further out an event is from actually happening, the more fondly we tend to think about it. But as the event starts getting closer, do we start to realize all of the intricacies of that event that were previously overlooked? Like when thinking about buying a new car, you could think about all the great experiences associated with now having a new car without fully realizing that that car will one day need new tires, an oil change, and will need premium gas. So by thoroughly thinking through every level of detail and intricacy about what you want to buy, you're more reasonably able to match the expectation of what it's like versus the reality of buying what you thought you wanted.

Seventh, comparison is the thief of joy. Research shows that people are more likely to change their opinion about what they want to buy by just showing them a larger but less desirable comparison instead. When that happens, consumers who compare their purchase are really more likely to lose sight of what's actually important for them, and instead just try to go after the best deal instead of what's really the most important to them.

An eighth point when it comes to money and happiness: They say follow the herd, not your head. Studies have found that the best indicator of whether or not we will enjoy something is whether or not other people have enjoyed it as well. And the 17th-century writer said at the very best, "Before we set our hearts too much upon anything, let us first examine how happy those are who already possess it."

As far as my own experiences go with all of this, here is what I think: Happiness is at its core just a frame of mind. It's our perception of reality and how we interpret the ever-changing information around us every single day.

Well, it does give one the ability to pursue their dreams and live life to the fullest; it does not guarantee them enjoyment from actually doing those things. Money just has the odd ability to exaggerate our current state of mind for better or for worse. Like if you're a pessimistic, miserable person without money, then chances are getting money will only exacerbate those feelings. If you're an optimistic, happy person without money, then having money will only enhance those same feelings.

But having money is not the reason for someone's happiness, and in fact, I believe that in some situations, having money can actually make things worse. So many of us are just taught to think that when X happens, then I will be happy. In our minds, we always think that happiness is something that takes place in the future, not right now, once certain events take place. But what happens is that our mind gets so wired into thinking, "When this, then that," that we never truly stop to realize that now is the time where we should be enjoying ourselves and happy—not necessarily in the future.

The detriment to thinking this way is that we never truly live in the present and realize just how great right now is. So the good news is that you don't need to be a multi-millionaire to be happy because they're no happier than pretty much everyone else. So really, by seeing the positives in an event and really appreciating what you have, and spending your money strategically on the things that matter the most, statistically, you're most likely to be happy—and smash like if you haven't done that already.

So with that said, you guys, thank you so much for watching! I really appreciate it. If you guys enjoy videos like this, as always, make sure to destroy the like button, destroy the subscribe button, and destroy the notification bells so YouTube notifies you anytime I post a video.

Also, feel free to add me on Instagram. I post there pretty much daily. So if you want to be a part of it there, feel free to add me there. And also go and add me on my second channel that is called The Graham Stepping Show. I post there every single day I'm not posting here, which means if you want to see me now every day, go and subscribe to me on that channel as well.

So with that said, thank you again for watching, and until next time!